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How much do you really save by getting your license?

When running the numbers on home purchasing/selling, it seems to make an awful lot of sense to me to get my real estate license. Most homes in my area go from $250k-400k, so 6% per transaction is a hefty amount. However, I'm wondering if I am missing some fees... I have heard that agents also have to pay a brokerage a significant part of that commission. Of course, there are also the fees for your licensing, renewal, etc.

I wouldn't get my license to practice as an agent, but mostly just for my own use so I can avoid paying commissions. Those of you who are experienced in doing this, how much can I really expect to save on a $300,000 home purchase and sale?

Comments

First off, don't expect to save 6% per transaction, I'll say why in a minute. Also, if you are ever licensed as a real estate agent/broker, be careful about posting commission percentages in public places like this. Saying something as simple as "The average commission here in (blank) is (blank)%", can be construed as price fixing. At least where I am in Oregon.

But yes, you will save significant amounts of money. Assuming the 6% that you said in your original post, this means that 3% is paid out to the broker representing the seller, and 3% paid to the broker representing the buyer. Brokerages usually do take a cut out of this, but that is also relative. Some charge 20%, some charge 50%, and some have a cap. So, with KW, where I am, there is a 20% fee taken out of transactions, until you have paid a total amount in commissions up to a set amount in that year. I'm not putting specific numbers, because these may be different in different places, and I don't want to be misleading.

However, my brokerage also allows the first 2 personal transactions that an agent is involved with in that calendar year to not be subject to the split. (and any after the cap are of course also not subject to the split)

So, if you were to buy a house for $300,000, and collected the 3% side of that commission for representing yourself, you would get paid $9,000 to buy it. Selling a house for $300,000, you're not really paying yourself, but you are saving half of the commission. You'll still likely be paying $9,000 to the broker representing whatever buyer shows up, unless you happen to be operating as a dual agent.

But you also have to remember the costs associated. You'll be paying for the course, the licensing fees, and probably monthly brokerage fees. If you're not intending to actually operate as an agent, these could severely minimize the amount of money you are actually saving if you can only buy one property every year or so.

Great information Sean. In my opinion you need to be buying or selling multiple houses a year to make it worth while. Another advantage is you can sometimes buy more houses as an agent because you can show them faster, write your own contracts and pay more because you save that commission

Thanks for the pointers guys. I've done some more research, and also read your great article on brokerage splits, Mark. It looks like for me right now it probably doesn't make sense yet. For the time being, I'm limited to buying one a year if I'm lucky, since my wife is in school and we are trying to pay her tuition without loans. She is in medical school, though, so once she is done, we plan to do a lot more since we should have good cash available then.

While I'm on the topic, let me ask you another question: my brother-in-law last year was house shopping, found a house they were very interested in, and just called the selling agent directly and asked if they could get a 2-3% discount if they didn't bring a buying agent to the table. They ended up offering around $10k under asking, plus the discount for no buying agent commission, and the offer was accepted and everything went very smoothly in their case. The same agent helped them with their paperwork and I guess in a way represented both of them.

Do you guys see any potential issues with doing this? It seems like a great way to get a discount without having your license, but also seems like you could get into some sticky situations with the agent trying to represent both sides. I've called on some houses here and asked the agents and they have all expressed willingness to proceed like this.

It is possible to save some money going that route. But you do have to be careful and look at the paperwork and numbers carefully. The sellers pay the commission so the buyers aren't gettting any discount if the agent takes a lower commission, but the seller might be more inclined to take a lower offer if they have to pay less fees.